1. Allied Grape Growers, 2014. All rights reserved. Winegrape Supply and Market Outlook Jeff Bitter Allied Grape Growers May 7, 2014

2. Allied Grape Growers, 2014. All rights reserved. Today’s presentation utilizes information obtained via Allied Grape Growers’ (AGG) annual Nursery Survey combined with critical evaluation of reports and data made available by the State of California. Wine shipment data is courtesy of the Gomberg Fredrikson Report. AGG’s internal operations data along with numerous pieces of anecdotal evidence was also used in the formulation of conclusions.

3. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions…….

4. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions Question #1: How did the 2013 crush size up?

5. Allied Grape Growers, 2014. All rights reserved. California Production Answering Some Key Industry Questions How did the 2013 crush size up?

6. Allied Grape Growers, 2014. All rights reserved. A regional look at production, stated in tons crushed How did the 2013 crush size up? Answering Some Key Industry Questions

7. Allied Grape Growers, 2014. All rights reserved. A look at average yields statewide How did the 2013 crush size up? Answering Some Key Industry Questions

8. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions Question #1: How did the 2013 crush size up? Answer: Clearly larger than recent averages, in total production as well as in per acre yields

9. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions Question #2: How many acres do we really have?

10. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions How many acres do we really have?

11. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions How many acres do we really have?

12. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions Question #2: How many acres do we really have? Answer: Much more than the state has historically reported or estimated

13. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions Question #3: What are growers planting today? (other than almonds)

14. Allied Grape Growers, 2014. All rights reserved. 29% White 71% Red Other Reds Include: Grenache Cab Franc Syrah Malbec Tannat Other Whites Include: Gewurztraminer Riesling Viognier Other florals What are growers planting today? Answering Some Key Industry Questions

15. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions Question #3: What are growers planting today? (other than almonds) Answer: Cabernet Sauvignon…. and a few other varieties

16. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions Question #4: What about the drought?

17. Allied Grape Growers, 2014. All rights reserved. Drought impacts different regions in different ways: North Coast North Coast Central Coast Central Coast Northern San Joaquin Valley (Lodi) Northern San Joaquin Valley (Lodi) Central and Southern San Joaquin Valley (east side) Central and Southern San Joaquin Valley (east side) Central and Southern San Joaquin Valley (west side) Central and Southern San Joaquin Valley (west side) What about the drought? Answering Some Key Industry Questions

18. Allied Grape Growers, 2014. All rights reserved. Viticulturally, what does it mean for 2014 and beyond? Functional root zone reduction (root flush minimized) Functional root zone reduction (root flush minimized) Potential for bud necrosis Potential for bud necrosis Restricted spring growth Restricted spring growth Nutrient deficiencies and/or toxicities Nutrient deficiencies and/or toxicities Potential lack of frost protection Potential lack of frost protection Vine stress, increased pest and disease pressure Vine stress, increased pest and disease pressure Water quality concerns Water quality concerns Potential canopy/crop load reduction Potential canopy/crop load reduction What about the drought? Answering Some Key Industry Questions

19. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions Question #4: What about the drought? Answer: The drought will undoubtedly cause concern and loss for California winegrape growers. Production will likely be negatively impacted.

20. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions Question #5: Will our domestic supply depress import growth?

21. Allied Grape Growers, 2014. All rights reserved. Will our domestic supply depress import growth? Answering Some Key Industry Questions

22. Allied Grape Growers, 2014. All rights reserved. Will our domestic supply depress import growth? Answering Some Key Industry Questions

23. Allied Grape Growers, 2014. All rights reserved. Will our domestic supply depress import growth? Answering Some Key Industry Questions

24. Allied Grape Growers, 2014. All rights reserved. Will our domestic supply depress import growth? Answering Some Key Industry Questions

25. Allied Grape Growers, 2014. All rights reserved. Will our domestic supply depress import growth? Answering Some Key Industry Questions

26. Allied Grape Growers, 2014. All rights reserved. Will our domestic supply depress import growth? Answering Some Key Industry Questions

27. Allied Grape Growers, 2014. All rights reserved. Will our domestic supply depress import growth? Answering Some Key Industry Questions

28. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions Question #5: Will our domestic supply depress import growth? Answer: Yes. Based on market behavior in the recent past, it should.

29. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions Question #6: What are the regional planting trends?

30. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions What are the regional planting trends? A high percentage of the “Value” plantings are in Lodi

31. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions What are the regional planting trends? Varieties charted are Chardonnay, Cabernet Sauvignon, Merlot, Pinot Noir and Zinfandel.

32. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions Question #6: What are the regional planting trends? Answer: Coastal planting of major varietals has increased substantially. Interior planting has shifted north to Lodi.

33. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions Question #7: Are we headed for surplus, balance or shortage?

34. Allied Grape Growers, 2014. All rights reserved. Are we headed for surplus, balance or shortage? Answering Some Key Industry Questions Average Statewide Yield = 7.28 TPA Assumes no escalation in the current rate of annual vineyard removals……. (<2% per year).

35. Allied Grape Growers, 2014. All rights reserved. Forecast shows production growth outpacing shipments in the near future Are we headed for surplus, balance or shortage? Answering Some Key Industry Questions

36. Allied Grape Growers, 2014. All rights reserved. Are we headed for surplus, balance or shortage? Answering Some Key Industry Questions

37. Allied Grape Growers, 2014. All rights reserved. Are we headed for surplus, balance or shortage? Answering Some Key Industry Questions Forecast shows acreage growth beginning to outpace the trendline by 2017.

38. Allied Grape Growers, 2014. All rights reserved. Answering Some Key Industry Questions Question #7: Are we headed for surplus, balance or shortage? Answer: We are not forecasting a shortage in the foreseeable future

39. Allied Grape Growers, 2014. All rights reserved. Questions? You may download or view a copy of this presentation at: www.alliedgrapegrowers.org